DEFC14A: BlackRock Health Sciences Term Trust Faces Proxy Fight as Saba Capital Seeks Board Seats and Management Agreement Termination

BlackRock Health Sciences Term Trust is urging shareholders to vote against Saba Capital's nominees and proposal to terminate the investment management agreement with BlackRock Advisors, LLC at the upcoming annual meeting.

Summary

• BlackRock Health Sciences Term Trust (BMEZ) is holding an annual meeting on June 25, 2024, where shareholders will vote on the election of trustees and a proposal by Saba Capital Management to terminate the investment management agreement with BlackRock Advisors, LLC.
• The Board of Trustees unanimously opposes Saba's nominees and proposal, recommending shareholders vote for the Board's nominees (R. Glenn Hubbard, W. Carl Kester, and John M. Perlowski) and against the termination of the investment management agreement.
• The Board believes its nominees have the necessary skills and experience to oversee the Trust and that terminating the agreement with BlackRock would harm the Trust and its shareholders.
• The Board highlights that the current Board Members have demonstrated their ability to consistently deliver value to shareholders, all while implementing shareholder-friendly initiatives, such as share buybacks that have generated approximately $17.7 million in shareholder profits.
• The Trust urges shareholders to use the WHITE proxy card to vote FOR the Board's nominees and AGAINST Saba's proposal, and to discard any proxy cards received from Saba.
• The Trust emphasizes that only the latest dated proxy will count at the meeting.

Sentiment

Score: 4

Explanation: The document is primarily defensive, outlining a proxy fight and urging shareholders to vote against a proposal that management believes is detrimental. While highlighting some positive performance metrics, the overall tone is cautious and reactive, indicating potential instability.

Positives

• The Board Nominees have extensive experience with registered closed-end funds and investment company governance.
• The current Board Members have demonstrated their ability to consistently deliver value to shareholders, all while implementing shareholder-friendly initiatives, such as share buybacks that have generated approximately $17.7 million in shareholder profits.
• The Trust was the top performing fund in its peer group in 2023 on a market price basis, returning 5.1% on market price compared to its peer groups median return of -1.6% on market price.
• Shareholders currently receive monthly distributions at a rate of 6.6% on market price.
• The Trust leverages a distinctive investment strategy within the sector, focusing on a risk-conscious and diversified portfolio that emphasizes smaller, next-generation healthcare companies, setting it apart from its peers.

Negatives

• Saba Capital Management is seeking to replace three Board members with its own nominees.
• Saba Capital Management is proposing to terminate the investment management agreement with BlackRock Advisors, LLC.
• The Board believes Saba's actions are harmful to long-term shareholders and that Saba engages in these tactics to benefit itself and its own hedge funds and investors.

Risks

• Termination of the investment management agreement would result in the firing of BlackRock as the Trust's investment adviser, depriving the Trust of BlackRock's experience and expertise.
• Termination of the investment management agreement would plunge the Trust into uncertainty about its investment adviser and its future, harming the Trust and its shareholders.
• If a new investment management agreement is not approved, the Trust would remain orphaned without an investment adviser to manage its assets.
• Termination of the Investment Management Agreement would require the Trust to cease using BlackRock in its name and could adversely impact the attractiveness of the Trust to prospective investors.

Future Outlook

The Board will continue to review the managed distribution plan to determine whether it should be continued, modified, or terminated.

Management Comments

• The Board believes the Board Nominees have the skills, qualifications and requisite experience in overseeing investment companies to act in the best interests of ALL shareholders.
• The Board believes that it is NOT in the best interests of the Trust and its shareholders to terminate the investment management agreement between the Trust and BlackRock Advisors, LLC.

Industry Context

Saba Capital Management, L.P. is described as an activist hedge fund with a history of investing in closed-end funds for the purpose of submitting proposals, often withdrawing them after target funds agree to certain liquidity events.

Comparison to Industry Standards

• The Trust was the top performing fund in its peer group in 2023 on a market price basis, returning 5.1% on market price compared to its peer groups median return of -1.6% on market price.
• The Trusts peer group is the Morningstar Health category.

Stakeholder Impact

• Shareholders are directly impacted by the outcome of the vote, which will determine the composition of the Board and the management of the Trust.
• Employees of BlackRock Advisors, LLC could be impacted if the investment management agreement is terminated.

Next Steps

• Shareholders are urged to vote using the WHITE proxy card.
• The Board will review the managed distribution plan to determine whether it should be continued, modified, or terminated.

Key Dates

Keywords

proxy statement, BlackRock, Saba Capital, Board of Trustees, investment management agreement, shareholder vote, closed-end fund, BMEZ, Health Sciences Term Trust